Digital assets are bought and sold globally, 24/7, can be divided into smaller and smaller ownership units, and can be transferred between buyers and sellers at low cost and with lightning speed around the world in a global market now valued in the trillions of dollars.
The digital assets market is seen as a huge economic opportunity for the United States that also brings with it many risks never before encountered or navigated. New markets—with their new technologies and new asset classes—require workable regulations and tax laws as well as strong and responsible industry oversight to build and ensure trust in those markets.
Precisely because Crypto[1] is so new and different, and precisely because the technology that enables it—blockchain—also extends far beyond finance, the strategies, protocols, procedures, processes, and tools that integrate and support the realization of crypto’s fullest market potential need workable regulations.
Precision ultimately makes a system workable. Reliability matters. Regulation matters. Tax policy matters. Without clear regulations, there are no rules of the game so there is no level playing field. Without clear tax policy, people don’t accurately file their tax returns, and the government doesn’t get fully funded.
As we come into 2026, the “who, what, when, where, and why” details are becoming increasingly critical for the appropriate regulation and taxation of digital assets. Figuring out how to enforce these rules in real time will require cooperation between government and industry stakeholders.
All of these considerations must be examined against the backdrop of Know Your Customer (KYC) requirements, data privacy, and confidentiality, all of which are handled differently in different countries.
Global co-operation on digital assets tax transparency
Given the wide range of digital asset types[2] and the variety of transactions,[3] tax reporting and compliance can be difficult without cross-governmental cooperation.
We are seeing some major international initiatives that are likely to significantly counter global tax evasion and fraud. The Organisation for Economic Co-operation and Development (OECD), for example, has taken the lead in convening 172 countries and jurisdictions to form the Global Forum on Transparency and Exchange of Information for Tax Purposes. This Forum monitors implementation of the globally recognized standards known as the international exchange of information on request (EOIR) and the automatic exchange of information (AEOI).[4]
OECD released the Crypto-Asset Reporting Framework (CARF) and amended the Common Reporting Standard[5] to frame IT formats that support information transmission between taxing authorities and to address cryptocurrency and digital asset tax evasion that falls outside of the Common Reporting Standard (CRS) framework that is already in use. According to the Thomas Reuters Institute, “[by] 2025, a monumental shift had occurred in the landscape of global cryptocurrency regulation. More than 60 nations—encompassing all G7 members and most G20 economies—formally embraced CARF, marking a significant acceleration toward a standardized international approach.”[6]
Under CARF, Crypto-Asset Service Providers (CASPs) will collect individuals’ tax residences and tax identification numbers and report that information to their domestic tax authority. As of November 13, 2025, OECD reports that 50 jurisdictions have committed to implement CARF and commence exchanges by 2027, including the United Kingdom, Canada, Mexico, and the European nations. Another 23 jurisdictions have committed to implement CARF by 2028, including the United States, Hong Kong (China), and Singapore. At the date of this writing, Argentina, Australia, El Salvador, India, and Viet Nam have not made firm commitments to CARF.[7]
Although a detailed discussion of the global environment is beyond the scope of this series, it is important to keep in mind the speed with which the crypto and digital asset markets are accelerating the pace of change, and the need for intergovernmental cooperation on standards development and sharing of key taxpayer-related data around the world.
U.S. digital assets regulation and taxation
In the United States—perhaps in recognition of the global nature of the digital assets markets—and the links between digital asset tax evasion, cybercrime, and a federal tax revenue gap estimated at $50 billion that is reportedly due to unreported digital asset transactions,[8] the President’s Working Group (PWG)[9] recommended that Congress enact comprehensive legislation to ensure fair and predictable crypto taxation. Without legislation, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) have tried to provide guidance within the limits of their statutory authority, but this has not proven sufficiently comprehensive to date. The PWG also directed the Treasury and the IRS to provide sensible and enforceable rules to ensure taxpayers’ crypto transactions are accurately reported.
In 2025, several bills have been moving through the federal legislative processes, including three comprehensive bills. The “Guiding and Establishing National Innovation for U.S. Stablecoins Act” or the “GENIUS Act” ran the full distance and was enacted into law, establishing a regulatory framework to support U.S. dollar-backed payment stablecoins that could help enable their wider use in financial transactions.[10] The “Anti-CBDC Act,” which focuses on prohibiting the Federal Reserve from issuing a central bank digital currency (CBDC), cleared the U.S. House of Representatives and is currently with the U.S. Senate.[11] And, the “Digital Asset Market Clarity Act of 2025” or the “CLARITY Act,” which seeks to provide a comprehensive framework for digital assets and to clarify the respective regulatory oversight authority of the CFTC and SEC. The CLARITY Act is also with the U.S. Senate at the time of this writing.[12]
As Congress continues to deliberate over the president’s crypto agenda, the U.S. Senate committees on agriculture, banking, and finance are all involved in the debate as to necessary regulations; the division of regulatory oversight between the CFTC and the SEC; funding and administrative capacity to conduct the necessary oversight work at federal agencies; and the taxation of digital assets.
As crypto goes mainstream, there is no doubt in my mind that the framework being put in place to regulate and tax digital assets needs to include some of the smartest laws ever written, and that these laws need to be crystal clear.
The democratization driver
Lawmakers need to carefully consider the overarching drivers of the crypto markets—that is, efforts to make digital assets available to everyone. Looking at a few of the papers addressing democratization of the financial markets shows that democratization raises tax policy questions.[13]
The president’s August 2025 Executive Order 14330, also shined a spotlight on democratization of the financial system, calling for various studies and actions to increase access to alternative assets for 401-k investors.[14] In the Executive Order, “alternative assets” were defined broadly as (1) “private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies”; (2) direct and indirect real estate interests, including debt instruments secured by direct or indirect interests in real estate; (3) holdings in actively managed investment vehicles that invest in digital assets; (4) direct and indirect investments in commodities; (5) direct and indirect interests in projects financing infrastructure development; and (6) lifetime income investment strategies including longevity risk-sharing pools.
With the stroke of the pen, the president opened up a new set of policy discussions about expanding acceptable investments by tax-exempt pension fund accounts to include both private market investments and digital asset investment vehicles. Following Executive Order 14330, observers were quick to weigh in on the potential for major escalations in systemic risks.[15] For example, SIEPR Senior Fellow Amit Seru at Stanford Institute for Economic Policy Research noted that “structurally, accommodating retail liquidity means either holding excess cash, diluting returns or selling assets in a downturn, triggering fire-sale dynamics that can spiral.” Seru went on to note the possibility of “valuation contagion”: a frightening term that many of us may recall from the Great Recession, but likely not by the majority of current crypto market participants who were still children in 2008 and 2009. At present, the mechanisms that fund crypto speculation by making available private credit,[16] current debt levels, and leverage ratios are already a known concern. In short, private markets and crypto are already closely interconnected.
If you can imagine a financial product, then you can also imagine a similar digital asset that exists now or may exist in the not-to-distant future. The current U.S. federal tax Code, however, is not all-encompassing with respect to the future tax treatments of these assets. Simply put, we do not know how they will be treated in the future. We do not like to call this “guesswork” but the reality is that we can only extrapolate at this point in time.
This overarching democratization of the financial markets needs to be kept in mind as we drill down into crypto taxation. This is because any asset that exists in the current financial markets also has the potential to become a digital asset that exists on a blockchain. Further, these digital assets are being held, bought and sold by many more people. Alongside traditional asset holders and investors, there is a significant influx of new entrants who are typically younger, less experienced, and less affluent than their traditional brethren.[17] Further still, these new entrants tend to be self-directed and are seeking professional counsel from professional services advisors who may be new to the crypto markets as well. And last, but not least, they are doing so under regulations, according to industry and professional standards frameworks, on technological frameworks, and through marketing channels that are not yet battle-hardened.
So, the ramifications of democratization are—in fact—profound.
Crypto professional services providers
At present, deep knowledge of the crypto markets is thin on the ground. There are not enough properly qualified crypto lawyers, accountants, appraisers, insurers, or risk management professionals to service burgeoning crypto market demand at present, or to help build out the new frameworks needed to support these growing markets. This skilled labor supply problem is not limited to business-to-consumer services, it is also a problem among business-to-business service providers on whom market participants depend.
If we are going to move the crypto industry towards an equitable future, real effort needs to be put toward fine tuning appropriate legislation and regulation. We need many more regulatory sandboxes to keep up with it all; more crypto working groups to develop and foster best practices among industry associations, and ways to create, evolve, and keep professional standards and training resources current and robust.
We need people with a solid grasp of both the strengths and the weaknesses in the current frameworks for crypto regulation and taxation. We need experts in crypto financial accounting, risk management, and insurance. We need to be training a new generation of professionals that understand the crypto markets so that the industry and market participants can thrive.
Crypto tax professionals
There is a shortage of skilled crypto tax professionals. AICPA, the leading voice for the accounting profession in the United States, estimates that there is a growing demand for accountants to be trained in crypto taxation. The same is true for tax lawyers. We need more groups like the American Bar Association, Section of Taxation, Cryptocurrency Task Force. It is an active and interesting group that regularly works to ensure that tax lawyers and the government stay up to speed and gain vital knowledge on the tax issues facing crypto developments and transactions. I am a member of this task force, and we actively participate at association meetings, workshops, and industry conferences.
Crypto financial accountants
Financial accountants play important roles in advising businesses with crypto activities to properly disclose and report on their financial conditions. They also play a vital role in identifying and quantifying company-wide crypto investment and activity risks.
In February 2022, the Financial Stability Board (FSB) released Assessment of Risks to Financial Stability from Crypto-assets, where the FSB warned that crypto assets could reach a point where they represent a threat to global financial stability.[18] Shortly after this report was issued, in May 2022 we saw the crypto sector suffer significant market losses.
As noted by Tyzz Yun Chen in a 2024 article in The CPA Journal,
“Excessive leverage, deficient collateral, volatile pricing, and a liquidity crunch contributed to the downfall of several crypto lenders, hedge funds, and exchanges in 2022—yet these risks were not obvious in their balance sheets, which did not provide adequate insights into the dangers crypto posed to their stability. Without an accounting rule for crypto lending, blended accounting practices obscured leverage risk, liquidity risk, and price risk. Differences were found in practices addressing offsetting receivables and liabilities; measurement mismatch of related assets; measurement mismatch of assets and related liabilities; inadequate breakdown of crypto assets; defective methods to determine cost basis; ambiguous accounting for customer funds; questionable accounting for in-house tokens; and inappropriate related-party accounting. Instead of providing for blended accounting practices that dilute transparency, an industry-specific accounting standard is needed for the crypto sector.”[19]
These are important issues with major consequences, providing an obvious example of a situation where accounting standards lag behind market developments. Accounting standards under GAAP and IFRS differ as well; with numerous efforts taking place to try to build consensus. In August 2025, the Financial Accounting Standards Board (FASB) added a research project on digital assets to “explore targeted improvements to the accounting for and disclosure of certain digital assets and related transactions.” This signals quite a departure from its position in 2020, when the FASB voted unanimously against adding a project to its technical agenda to address the accounting for digital assets.[20]
Crypto risk managers
We need more crypto risk managers. There are some serious efforts to manage broader risks that tend to be associated with the emerging crypto markets. Risk experts associated with standards bodies like FASB and IFRS seek to address the broader challenge sweeping across commerce as companies do more crypto business.
To assist corporate treasurers with the range of related issues, including internal treasury risk management, digital asset treasury companies (DATCOs) are “a new class of public companies that integrate digital assets into their primary business operations and balance sheets […] reshaping capital strategy, drawing attention to accounting innovation and operational infrastructure.”[21]
On the banking side, in July 2025, the Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of the Comptroller of the Currency issued a Joint Statement on Risk-Management Considerations for Crypto-Asset Safekeeping[22] regarding banks’ potential risk-management considerations related to holding crypto-assets on their customers’ behalf.
Crypto-specific risk managers are also critically needed in the insurance business.[23] According to a July 2025 article in Risk & Insurance, “the cryptocurrency insurance market remains largely untapped […]with only 11% of crypto holders currently insured while 42% of uninsured holders express willingness to purchase coverage […AM Best]. This massive gap between demand and supply presents both significant challenges and substantial opportunities for insurers willing to navigate this emerging sector.” Fuller participation of specialist underwriters will start to backstop the digital asset markets while shining light on actuarial evidence that supports the need for tighter crypto regulation.
Global tax collection
Worldwide crypto tax collection and enforcement activities are areas that need a lot of intellectual and technological heft and oversight. Crypto is already massive and it’s already global . . . so it is best overseen by sophisticated global efforts. This year, the U.S. federal government has chosen to partner with OECD and other nation states to address the kinds of challenges that I reviewed earlier.
Appropriate training for appropriately qualified governmental professionals needs to be organized, budgeted, and implemented. If the United States is to maintain its preeminent reputation as one of the great financial and trading centers in the world, I believe that putting in place top-flight crypto tax expertise within the Department of the Treasury and the IRS is nonnegotiable.
Crypto taxpayers
Trading markets have changed dramatically since the last major financial democratization took place in the 1980s. When financial markets opened up to millions of people in the 1980s, everyday people—retail customers—could invest, but for the main part, they might have needed to be qualified investors with a certain minimum net worth before trading. One way or another, however, retail customers needed third-party brokers to execute their trades. At present, crypto does not have guard rails in place to hold back investors from inappropriate investments.
At the end of 2024, it was estimated that 60 percent of crypto investors fall between the ages of 18 and 34.[24] While most crypto investors earn more than $100,000 and are well-educated, they may not understand their crypto-related tax obligations. In addition, some of them may be addressing their tax obligations under the Internal Revenue Code (Code)[25] for the first time. Crypto investors are overwhelmingly young, are likely to be inexperienced with recordkeeping requirements, and have never filed a complex tax return. They might be involved in blockchain establishment and buildout; they might participate in Initial Coin Offerings and DeFi projects; they might operate blockchain nodes, and be crypto miners and stakers.
And at present, regulators and taxing authorities are still figuring out how to tax these activities. When the tax rules are not clear, taxpayers use this to their advantage to take inconsistent tax positions that are most favorable to their bottom lines. This lack of clarity and, to an extent, lack of visibility with respect to taxpayers’ obligations is about to change, though.
In 2023, the IRS estimated that only 25 percent of crypto investors voluntarily paid taxes. According to Vera Tzoneva, COO at CoinTracker, “the vast majority don’t even know that they have to file their crypto taxes.” In 2026, however, this “unawareness problem” will start to be addressed. Crypto exchanges (and traditional exchanges that enable crypto trading) will need to issue IRS Form 1099-DAs to their customers.[26] We are going to have an upswing in awareness in 2026, and I will be writing about the nuts and bolts of U.S. crypto filing obligations in a future post.
Crypto typically involves large volumes of small transactions. Tax calculations can go wrong quickly—and in tax circles, it’s well known that it is often a bigger headache to fix one million one-dollar problems than it is to fix a single one-million-dollar problem. Fixing many small problems places extreme administrative burdens on both taxpayers and our taxing authorities.
It is obviously best to get calculations right in the first place. To address this problem, a vibrant crypto accounting and trade tracking industry is starting to flourish. But this emerging crypto service provider market—along with the technological advances that are made possible by blockchain itself—needs well thought through U.S. regulations and guidance in place as soon as possible if crypto is going to fulfill its true potential.
Crypto tax regulation
If we want to tax people effectively and to be sure that everyone pays their fair share, crypto tax rules need to be clear. On October 1, 2025, I was honored to be a witness at the U.S. Senate Committee on Finance hearing, “Examining the Taxation of Digital Assets.”[27] The hearing can be viewed, and the written testimonies of all witnesses can be accessed at the committee’s website.[28]
Basically, there are three different approaches to the taxation of digital assets. First, some believe that since most of the topics can be addressed by current law, the taxation of crypto has stood the test of time through pronouncements, proceedings, and case law. Second, others believe that with a few tweaks to the current tax Code, we can provide the framework needed to appropriately tax digital assets. And third—some believe we should start from scratch with new laws to specifically accommodate crypto transactions.
As will become clear in the remainder of this series, I am essentially in the second camp. Although digital assets are a novel asset class, this is not the first time that a new asset class has been created and made available for trading, nor is this the first time that our tax Code has been applied to a totally new asset class. In addressing the taxation of digital assets, I believe we need to look to existing Code provisions and tax law while clarifying those areas that need revisions or modifications. I believe it is a mistake to rip up the entire tax system or attempt to rewrite the federal tax Code as it applies to crypto.
Although there are areas of the tax laws where the Treasury has the authority to write operative rules, their authority has its limits, and it is not the best avenue to pursue for tax clarifications of the sorts we need at this time. All of the relevant tax Code provisions were enacted before digital assets were ever invented, so digital assets were never considered when Congress addressed the tax character of property. With this said, however, existing tax rules can be applied to digital assets just as they are applied to other types of property. Statutory—as opposed to regulatory—guidance will ensure that taxpayers report their transactions lawfully, preventing them from “gaming the system,” that is, selectively applying rules most advantageous to them for particular transactions.
From a U.S. tax standpoint, let’s start with a quick overview of digital assets as “property.”
The tax framework for digital assets addresses three broad topics:
- Tax character: the tax status as capital or ordinary assets, typically based on the taxpayer as an investor, trader, dealer or hedger
- Tax timing: when and how income is reported once a taxpayer has “dominion and control” over it
- Source: the location where income is earned or services are performed
Some Code provisions apply to specific types of property and specific transactions involving securities, commodities, and foreign currency, such as Code Sections 475, 988, 1091, 1092, 1232, and 1256 to name a few. Many digital assets are taxed as commodities and subject to those rules, while some are taxed as securities. I will explore these specifics in detail later in this series.
Real World Assets
When financial assets are tokenized and transferred on a blockchain, I believe they should retain their tax character as the type of asset the token actually represents in the hands of the taxpayer.
Tokenizing a security and trading it on a blockchain, for example, should not convert a security into something other than a security. Because tokens can represent real world assets, Congress should focus on the exact work the tokens do in the economy.
In other words, tokens should be treated in the same way as their functionally similar counterparts are treated when traded off the blockchain. Securities should be taxed as securities, and commodities should be taxed as commodities. Otherwise, we are creating the opportunity for tax arbitrage. Opening up questions as to whether it is more advantageous to invest in a real world asset, tokenized asset, or a special purpose vehicle (SPV) to allow investors to hold a fraction of a digital asset.
When considering the Code provisions that apply to stock and securities, the tax rules have specific definitions that should not be pushed aside if Congress adopts a broader definition of securities for federal regulatory purposes. The tax Code definitions of securities and commodities, with slight modifications, apply to digital assets.
Blockchain technology can improve tax compliance
Blockchain technology can improve tax compliance, reduce administrative costs, and enhance the efficiency of tax reporting and collection while still protecting taxpayer privacy. It can eliminate data entry errors that result when information is re-entered multiple times over the lifetime of a trading cycle as a transaction is cleared and settled. In addition, the ability to inspect the blockchain improves transparency and promotes the integrity of the tax system. Further, the use of “zero knowledge proofs” can power the blockchain without exposing taxpayer identities.
Sometimes, the tax Code can be ground zero for addressing operational challenges with compliance. By way of illustration, one example is the current requirement that taxpayers who make digital asset contributions to charities in excess of $5,000 must obtain a “qualified appraisal” from a “qualified appraiser.” The regulatory language emphasizes an obvious problem. It is a challenge at best and impossible at worst for a taxpayer to be able to locate and identify a “qualified appraiser” of digital assets who meets the experience and education requirements. But when savvy taxpayers must hire an appraiser when donating publicly traded digital assets, they might well question why on earth they may need to do this. Taxpayers are not required to get an appraisal when they contribute publicly traded stocks and securities to charities.
And they would be correct. It makes no sense at all. An actively traded digital asset donation should be exempt from the qualified appraisal requirement just as the donation of stock and securities traded on a public securities market is exempt. Actively traded property is actively traded property. Digital asset transactions are traceable, and the fair market value of actively traded digital assets can be determined from the trading price at the relevant crypto exchange at the time of the donation. The bigger question is on defining the specific qualifications of the specific crypto market on which a specific actively traded crypto asset is traded.
Conclusion
Many of the topics discussed at the U.S. Senate hearing go to the heart of the very issues of effective and fair taxation. Congress is focusing on these important issues, hopefully in a bipartisan way. What has become clear to me is that the next rounds of digital asset regulation and taxation must come out of the gate as fair, understandable, and workable in the real world. In the rest of this series I focus on these goals.
In Parts III, IV, V, VI and VII, I will focus on five topics that were discussed at the Senate hearing, generated strong debate, and resulted in significant follow-ups after the hearing. I will give you my thoughts on the taxation of mining and staking, on the proposed ‘de minimis’ exception for reporting gains on small transactions, discuss anti-abuse rules, and application of mark-to-market tax treatment. I’ll close the series with a discussion of the trading safe harbor, which is an especially important consideration in attracting foreign investment to the United States.
